16 May 2012

Greece set to go to polls again

6:04 am on 16 May 2012

Greece is set to go to the polls again after days of coalition talks failed to produce agreement on a new government.

A final round of talks on Tuesday morning broke up without a deal.

In elections on 6 May, a majority of Greek voters backed parties opposed to austerity plans demanded by the European Union and International Monetary Fund in return for two bailouts, the BBC reports.

President Karolos Papoulias.

President Karolos Papoulias. Photo: AFP

President Karolos Papoulias will appoint a caretaker government on Wednesday. He will meet all political leaders at 1pm local time to put in place an interim government until the new vote, expected to take place on 10 June or 17 June.

"Unfortunately, the country is heading again toward elections," the leader of the Socialist Pasok party, Evangelos Venizelos, told reporters after the talks on Tuesday.

Polls suggest the leftist Syriza bloc, which came second in the vote in May vote and rejects all further cutbacks, could become the largest party after a new election.

It wants to renegotiate the bailout package but also wants to keep Greece in the euro currency.

European leaders say that they will cut off funding for Greece if it rejects the bailout agreed in March.

This would mean effective bankruptcy for Greece and its all but certain exit from the European single currency, according to analysts.

Markets fall

The political uncertainty has worried Greece's international creditors, who have extended the country billions of euros in rescue loans over the past two years.

European stock markets have fallen and the euro has dropped sharply in reaction to the failure of the talks in Athens on Tuesday.

At the same time, new figures show the eurozone has narrowly avoided slipping into recession.

Confounding gloomy predictions, growth across the 17-nation zone was exactly zero in the first quarter of the year.